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WTO: U.S. OK

Online gaming settlement leaves American online gaming ban intact

The United States and the European Union have worked a deal that will allow the U.S. to continue to shut out foreign operators of online gaming for the foreseeable future.

To compensate for the blocking of the open market where gambling is concerned, European Union member states will receive more opportunities in four other areas within the U.S. economy.

United States trade representative spokeswoman Gretchen Hamel released this statement on December 17: “We are pleased to confirm that the United States has reached agreement in the GATS Article XXI process with Canada, the E.U. and Japan. The agreement involves commitments to maintain our liberalized markets for warehousing services, technical testing services, research and development services and postal services relating to outbound international letters. These commitments meet our World Trade Organization obligation under the U.S. General Agreement on Trade in Services Article XXI to make a compensatory adjustment in our WTO services commitments. We now enter a 45-day period in which the remaining claimants have a right to request arbitration. We will continue to discuss this matter with the other claimants to explain how our proposal is consistent with our WTO obligations.”

In a very related story-in fact the story which created the need for the above solution-World Trade Organization arbitrators found in favor of Antigua and Barbuda in its online gaming trade dispute against the U.S., but awarded the Caribbean island nation much less than it was seeking. Much, much less. Where the plaintiff was requesting opportunity equal to $3.4 billion in annual missed revenues, the panel of three decided by a 2-to-1 vote that $21 million was the correct figure.

To make up the $21 million, the panel authorized Antigua to suspend its obligations to the United States in the area of copyrights, trademarks and other forms of intellectual property rights. In other words, Antigua can effectively host sellers of pirated DVDs, CDs and the like, to the tune of $21 million a year.

United States trade representative spokesman Sean Spicer released the following statement: “The United States is concerned, however, that the arbitrator agreed with Antigua’s request to suspend WTO concessions not just with respect to services, but also with respect to intellectual property rights (IPR). Any authorization pursuant to the award would be strictly limited to Antigua.”

Mark Mendel, the lawyer for Antigua who has led the case since it began, had mixed feelings about the decision. In a statement he said, “I am pleased that the panel approved our ability to cross-retaliate by suspension of intellectual property rights of United States business interests. That has only been done once before and is, I believe, a very potent weapon.”

He was not as happy with the much lower-than-sought damage award, but saw some positive in it.

“US $21 million a year in intellectual property rights suspension going forward indefinitely is not such a bad asset to have,” he said in a statement. “I hope that the United States government will now see the wisdom in reaching some accommodation with Antigua over this dispute and look forward to seeing efforts in this regard.”

The WTO dispute was originally filed by Antigua and Barbuda in 2003, when the U.S. blocked online operators based on the islands from taking bets from U.S. citizens. It was discovered that the GATS schedule unintentionally included market access to internet gambling operations based outside of the U.S. Although the U.S. maintained that its gambling laws predated the WTO and would qualify for a GATS exception for laws necessary to protect public morals or to maintain public order, the case was complicated by the fact the U.S. does permit betting on horse racing through domestic-based online gaming operators.

States Support Gambling Ban

Attorneys general from 43 states have come out in opposition to a proposal to repeal the Unlawful Internet Gambling Enforcement Act.

In a letter to congressional leaders, the National Association of Attorneys General said the UIGEA has driven off many illegal gambling operators, and they have “grave concerns” about repealing the ban.

The only attorneys general who did not sign the letter were Catherine Cortez Masto of Nevada, and those of Iowa, Kentucky, Massachusetts, Michigan, Nebraska and New York.

U.S. Rep Barney Frank said he was puzzled by the letter.

“It seems inconsistent that conservatives would want states to regulate the internet,” he said.

Regardless, Frank said his bill is unlikely to advance in 2008.

“We still don’t have enough support. We’re waiting to see if gamblers on the internet are going to generate that support,” Frank said.

An alternative bill from Nevada Rep. Shelley Berkley has more support, and she expects it to pick up in the new year. The bill calls for a one-year study of online gaming.

“I think my bill would be the appropriate first step,” Berkley said. “Otherwise, we are going to continue to legislate piecemeal without having any information from a study whatsoever.”

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